US pay-TV suffers record subscriber drop

Published: August 25, 2010 09.50 Europe/London

The combined US pay-TV market has been hit by its first ever subscriber fall, according to tracking data released by research firm SNL Kagan. The company blamed the combination of the weak US economy as well as the transition to digital broadcasting, suggesting that US operators may not be immune from the kind of subscriber erosion that has seen European cable lose share to free-to-air DTT services.

Kagan said the US market encountered its worst ever second quarter performance, losing 216,000 customers compared to a 378,000 gain in the same period last year. Cable suffered its worst quarterly video loss to date, loosing 711,000 subscribers, as six of the eight MSOs reported individual worst performances.

The DBS (DTH) and telco businesses had some cheer to report, declaring additions of 81,000 and 414,000 subscribers respectively. Cable MSO’s share of combined video subscribers dropped to 61%, against 63.6% in the Q2 2009.

Telco’s, such as Verizon’s FiOS service continue to eat into the video business, growing their share from 4.3% in Q2 2009 to 6% in Q2 2010.

“Although it is tempting to point to over-the-top video as a potential culprit, we believe economic factors such as low housing formation and a high unemployment rate contributed to subscriber declines in the second quarter,” said SNL Kagan Analyst Mariam Rondeli. “We are also seeing churn resulting from the broadcast digital transition, which boosted video uptake early last year, as many have abandoned their paid subscriptions once initial promotional contracts expired.”